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Beware the "without prejudice" temptation

Most employers will be broadly aware of the possibility of using "without prejudice" channels to settle their employment disputes. They will have some notion of the benefit of discussions conducted on this footing i.e. that where the without prejudice rule applies, their attempts to settle will be off the record so far as the court or tribunal is concerned and thus, should negotiations break down, they will not be prejudiced by what concessions or offers they may have made in the process.

The danger employers face is that the without prejudice privilege will not apply in every situation.

There will be some employers who are simply not alert to this peril at all. Others, perhaps broadly aware of its scope, may nonetheless be taking undue comfort from the recent widespread reporting of two cases (Framlington v Barnetson (2007) and Brodie v Nicola Ward (t/a First Steps Nursery (February, 2008)) which are being portayed in legal and HR circles as extending the scope of the "without prejudice" rule.

We would urge employers to remain wary. Limitations remain, namely:

there must be a dispute in existence which the without prejudice dialogue is aimed at resolving; and
privilege will be lost where the inadmissibility of "without prejudice" communications would hide a "dishonest case" or some "unambiguous impropriety".

Is there an existing dispute?

This can be a tricky question in itself.

In Framlington, the Court of Appeal helpfully held that a dispute arose not merely where the parties are already litigating or there is a threat of litigation, but where the parties contemplate or might reasonably be contemplating litigation. The facts of the case were that the employer had already made clear its intention to dismiss the employee (a senior executive), and the court thought it implausible in context that litigation had not been contemplated given the sums involved and the particular nature of the settlement negotiations.

But every case will need examining on its merits, and in most cases it will be difficult to identify the earliest point at which a dispute exists and at which it might therefore be safe to attempt to initiate a without prejudice dialogue.

At one extreme, how often, still, are unsuspecting employees called into meetings and, no sooner than told they are at some risk of dismissal or redundancy, presented with a settlement offer or even fully drafted compromise agreement? It may have the "without prejudice" badge, but can there really be said to be a dispute, even on its widest interpretation, in existence before the employee has even had a chance to take it all in?

Oddly, the assessment may be most acute where the employer, eager to minimise the risk of unfair dismissal findings and uplifts to tribunal awards, wants to be seen to be running with the statutory minimum dismissal procedures. Arguably the employee could seek to adduce the evidence of any purportedly "without prejudice" offer made at this stage to demonstrate the employer's predetermined decision to dismiss and thus establish its failure to comply, at the very least in spirit, with the minimum statutory procedures.

In similar fashion, the efficacy of a meaningful redundancy consultation exercise might also be challenged.

No hiding of "dishonest cases" or "unambiguous impropriety"

Even where there is a dispute, privilege will be lost where the inadmissibility of "without prejudice" communications would hide a "dishonest case" or some "unambiguous impropriety".

Challenges along these lines were recently made in the Brodie v Nicola Ward (t/a First Steps Nursery) case. The question before the Employment Appeal Tribunal (EAT) was whether a proposal to the employee, made on a without prejudice basis, that she resign her employment as part of the employer's settlement of her long-running sick pay claim, was admissible as evidence supporting her claim for constructive dismissal.

The employee contended the proposal was the "last straw" in the employer's conduct leading up to her resignation, and thus critical to her constructive dismissal claim. Ruling against her, the EAT held that the proposal should remain inadmissible in evidence. It had been made in a genuine attempt to resolve an existing dispute and there was nothing dishonest in the employer's case.

Employers should note, however, that although the EAT may be signalling a more relaxed policy towards maintaining without prejudice privilege even where the evidence, if admitted, would assist a constructive dismissal claim, there will still be exceptional cases where the evidence is allowed on "dishonest case" or "unambiguous impropriety" grounds ; and on a more general footing there are judicial soundings to indicate a potentially greater reluctance to uphold without prejudice status where public policy matters on such issues as discrimination and victimisation come into play.

For more information, please contact Rory O'Connor.